Deck 7: Accounting for Receivables

Question 1

If a company uses the percent of receivables method to estimate uncollectible accounts, the company will first determine the required ending balance in Allowance for Doubtful Accounts; the Uncollectible Accounts Expense will be the difference between that amount and the balance in the Allowance for Doubtful Accounts.

Answer 1

True

Question 2

For a company that uses the allowance method, the write-off of an uncollectible account receivable is an asset use transaction.

Answer 2

False

Question 3

Willis Company had $200,000 in credit sales for Year 1, and it estimated that 2% of the credit sales would not be collected. The balance in Accounts Receivable at the end of the year was $38,000. Willis had never used the allowance method to account for its receivables until Year 1. The net realizable value of its accounts receivable at the end of the year was $34,000.

Answer 3

True

Question 4

The direct write-off method does a better job of matching revenues and expenses than does the allowance method.

Question 5

A company that uses the direct write-off method must still prepare a year-end adjustment to estimate its uncollectible accounts.

Question 6

Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.

Question 7

The direct write-off method overstates assets on the balance sheet.

Question 8

Most companies report receivables on their balance sheets at the net realizable value.

Question 9

The net realizable value of accounts receivable decreases when an account receivable is written off.

Question 10

The best estimate of the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.

Question 11

With the direct write-off method, writing off an account receivable is an asset use transaction.

Question 12

The adjustment to recognize uncollectible accounts expense is an asset use transaction.

Question 13

The adjustment to recognize uncollectible accounts expense does not affect the net realizable value of receivables.

Question 14

The collection of an account receivable is an asset source transaction.

Question 15

The face value of Accounts Receivable plus the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.

Question 16

The longer an account receivable has been outstanding, the less likely it is to be collected.

Question 17

If a company estimates uncollectible accounts based on a percentage of receivables, the resulting estimate will be presented on the balance sheet as the ending balance in Allowance for Doubtful Accounts.

Question 18

When a company receives payment from a customer whose account was previously written off, the account is reinstated and the net realizable value of Accounts Receivable increases.

Question 19

When an uncollectible account receivable is written off under the allowance method, the amount of total assets is unchanged.

Question 20

When a company receives payment from a customer whose account was previously written off, the customer's account should be reinstated.

Question 21

Making a loan to another party is considered an investing activity on the statement of cash flows.

Question 22

The Miller Company earned $123,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $82,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.What is the amount of uncollectible accounts expense that will be recognized on the Year 1 income statement?

A)$2,460
B)$1,230
C)$3,690
D)$41,000

Question 23

On January 1, Year 1, the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800. On January 15, Year 1, an $800 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off?

A)$36,200
B)$33,400
C)$35,000
D)$34,200

Question 24

The year-end adjustment to accrue interest on a note receivable is an asset source transaction.

Question 25

The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. What is the amount of uncollectible accounts expense that will be recognized on the Year 1 income statement?

A)$5,700
B)$1,320
C)$4,080
D)$54,000

Question 26

The operating cycle is the average time that a company spends acquiring inventory to sell.

Question 27

Many businesses find it more efficient to offer credit directly to customers rather than to accept third-party credit cards.

Question 28

On January 1, Year 2 Grande Company had a $19,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $74,000 of service on account. The company collected $70,500 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

A)$380
B)$6,000
C)$1,410
D)$1,480

Question 29

The longer it takes to collect accounts receivable, the greater the implicit interest cost that is incurred.

Question 30

When a company accepts a credit card payment for a sale, the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.

Question 31

On January 1, Year 1, the Accounts Receivable balance was $31,300 and the balance in the Allowance for Doubtful Accounts was $3,800. On January 15, Year 1, an $1,120 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off?

A)$30,180
B)$26,380
C)$27,500
D)$28,620

Question 32

Collecting a credit card receivable is an asset source transaction.

Question 33

On January 1, Year 2 Grande Company had a $18,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $72,000 of service on account. The company collected $68,500 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?

A)$68,500
B)$67,130
C)$72,000
D)$54,360

Question 34

On June 1, Year 2, Carolina Company collected a $24,000 note receivable that had been issued on June 1, Year 1. The note carried a 6% interest rate. On June 1, Year 2, the company will recognize interest revenue in the amount of $1,440.

Question 35

The Miller Company earned $117,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $79,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.What is the net realizable value of Miller's receivables at the end of Year 1?

A)$34,490
B)$35,630
C)$41,510
D)$38,000

Question 36

On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

A)$320
B)$1,000
C)$2,080
D)$1,940

Question 37

On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?

A)$97,000
B)$104,000
C)$89,520
D)$95,060

Question 38

Chadwick Company's sales for Year 1 were $8,700,000. The ending balance of accounts receivable was $801,000 at the end of the year. During Year 1, Chadwick collected $8,400,000 on its accounts receivable. The accounts receivable turnover ratio for the year was 10.5.

Question 39

Other things being equal, the longer a company's operating cycle, the higher the company's operating costs are likely to be.

Question 40

The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.What is the net realizable value of Miller's receivables at the end of Year 1?

A)$54,000
B)$49,920
C)$59,700
D)$48,300

Question 41

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $71,800 and $3,100, respectively. During Year 2, Kincaid reported $194,000 of credit sales, wrote off $1,800 of receivables as uncollectible, and collected cash from receivables amounting to $234,500. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.Which of the following describes the effects of writing off the uncollectible accounts?

A)Increase assets and stockholders' equity
B)Increase assets and decrease stockholders' equity
C)Decrease assets and stockholders' equity
D)Does not affect assets or stockholders' equity

Question 42

Blain Company has $20,000 of accounts receivable that are current, $10,000 that are between 0 and 30 days past due, $6,000 that are between 30 and 60 days past due, and $1,600 that are more than 60 days past due. Blain estimates that 2% of the receivables that are current will be uncollectible, 5% of those between 0 and 30 days past due will be uncollectible, 10% of those between 30 and 60 days past due will be uncollectible, and 50% of those more than 60 days past due will be uncollectible. Just prior to recognizing uncollectible accounts expense, Blain's allowance for doubtful accounts has a $200 positive balance. Assuming Blain uses the aging method to estimate uncollectible accounts expense, the amount of uncollectible expense will be

A)$2,100
B)$2,500
C)$2,300
D)$1,900

Question 43

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $66,800 and $2,000, respectively. During Year 2, Kincaid reported $169,000 of credit sales, wrote off $1,450 of receivables as uncollectible, and collected cash from receivables amounting to $191,100. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.What is the amount of uncollectible accounts expense that will be reported on the Year 2 income statement?

A)$1,690
B)$668
C)$1,911
D)$1,450

Question 44

The balance in Accounts Receivable at the beginning of the year amounted to $3,040. During the year, $9,880 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $1,980, and uncollectible accounts expense amounted to $840, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?

A)$10,100
B)$9,880
C)$12,920
D)$10,940

Question 45

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $73,200 and $3,400, respectively. During Year 2, Kincaid reported $201,000 of credit sales, wrote off $1,900 of receivables as uncollectible, and collected cash from receivables amounting to $246,700. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

A)Increase total assets and retained earnings
B)Decrease total assets and increase retained earnings
C)Decrease total assets and net income
D)Increase total assets and decrease net income

Question 46

Domino Company ages its accounts receivable to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $47,850 and $3,800, respectively. During Year 2, the company wrote off $2,820 in uncollectible accounts. In preparation for the company's estimate of uncollectible accounts expense for Year 2, Domino prepared the following aging schedule: What amount will be reported as uncollectible accounts expense on the Year 2 income statement?

A)$5,116
B)$6,096
C)$2,296
D)$2,820

Question 47

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $62,600 and $1,100, respectively. During Year 2, Kincaid reported $148,000 of credit sales, wrote off $1,150 of receivables as uncollectible, and collected cash from receivables amounting to $154,500. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.What is the net realizable value of receivables that will be reported on Kincaid's Year 2 balance sheet?

A)$53,470
B)$53,520
C)$56,100
D)$54,950

Question 48

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales. What is the amount of uncollectible accounts expense that will be reported on the Year 2 income statement?

A)$310
B)$725
C)$745.50
D)$550

Question 49

Hoff Company uses the allowance method. An account that had been previously written-off as uncollectible was recovered. How do the two parts of the recovery (reinstate receivable and collect the receivable)affect the elements of the financial statements when the two parts are considered together?

A)Increase total assets and stockholders' equity
B)Increase total assets and decrease total liabilities
C)Decrease total liabilities and increase stockholders' equity
D)Has no effect on total assets, total liabilities or stockholders' equity

Question 50

Ron Company experienced an accounting event that had the following effects on its financial statements. Which of the following events could have caused these effects?

A)Recognized uncollectible accounts expense under the aging method.
B)Recognized uncollectible accounts expense under percent of receivables method.
C)Recognized uncollectible accounts expense under the percent of revenue method.
D)All of the answers describe events that could have caused the effects shown in the statements model.

Question 51

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales. What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

A)Increase total assets and retained earnings
B)Decrease total assets and increase retained earnings
C)Decrease total assets and net income
D)Increase total assets and decrease net income

Question 52

Which of the following statements is true regarding aging accounts receivable?

A)An aging schedule is used to improve the estimate used in the percent of revenue method of determining the uncollectible accounts expense.
B)The aging method of estimating uncollectible accounts is based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected.
C)The aging of accounts receivable involves applying lower uncollectible percentage estimates to older receivables.
D)All of the statements are true.

Question 53

The balance in Accounts Receivable at the beginning of the year amounted to $16,000. During the year, $64,000 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $10,000, and uncollectible accounts expense amounted to $4,000, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?

A)$66,000
B)$64,000
C)$80,000
D)$70,000

Question 54

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales. What is the net realizable value of receivables that will be reported on Kincaid's Year 2 balance sheet?

A)$29,075
B)$27,725
C)$28,950
D)$28,400

Question 55

How would accountants estimate the amount of a company's uncollectible accounts expense?

A)Consider new circumstances that are anticipated to be experienced in the future.
B)Compute as a percentage of revenue.
C)Consider industry averages.
D)All of these answer choices are correct.

Question 56

Which of the following reflects the effect of the year-end adjustment to record estimated uncollectible accounts expense using the allowance method?

A)Option A
B)Option B
C)Option C
D)Option D

Question 57

Domino Company ages its accounts receivable to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $76,500 and $5,800, respectively. During Year 2, the company wrote off $4,640 in uncollectible accounts. In preparation for the company's estimate of uncollectible accounts expense for Year 2, Domino prepared the following aging schedule: What amount will be reported as uncollectible accounts expense on the Year 2 income statement?

A)$6,132
B)$1,512
C)$7,292
D)$4,640

Question 58

Blain Company has $20,000 of accounts receivable that are current, $10,000 that are between 0 and 30 days past due, $6,000 that are between 30 and 60 days past due, and $1,600 that are more than 60 days past due. Blain estimates that 2% of the receivables that are current will be uncollectible, 5% of those between 0 and 30 days past due will be uncollectible, 10% of those between 30 and 60 days past due will be uncollectible, and 50% of those more than 60 days past due will be uncollectible. At the beginning of Year 1, Blain had a $2,000 positive balance in its allowance for doubtful accounts. During Year 1, Blain wrote-off $2,200 of uncollectible receivables. Assuming Blain uses the aging method to estimate uncollectible accounts expense, the amount of uncollectible expense will be

A)$2,000
B)$2,100
C)$2,300
D)$2,500

Question 59

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $64,000 and $3,150, respectively. During Year 2, Allegheny wrote off $5,700 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $5,000. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

A)$7,550
B)$5,000
C)$1,850
D)$5,700

Question 60

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales. Which of the following describes the effects of writing off the uncollectible accounts?

A)Increase assets and stockholders' equity
B)Increase assets and decrease stockholders' equity
C)Decrease assets and stockholders' equity
D)Does not affect assets or stockholders' equity

Question 61

Under the direct write-off method, uncollectible accounts expense is recognized

A)in an adjusting entry at the end of the accounting period.
B)when the allowance account has a zero balance.
C)when an account is determined to be uncollectible.
D)in a closing entry at the end of the accounting period.

Question 62

Which of the following is the term commonly used to describe the practice of reporting the net realizable value of receivables in the financial statements?

A)Cash flow method.
B)Allowance method.
C)Direct write-off method.
D)Accrual method.

Question 63

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of the adjustment dated December 31, Year 1, on the financial statements of the Loudoun Corporation?

A)Option A
B)Option B
C)Option C
D)Option D

Question 64

What is the term used to describe the amount of accounts receivable that is actually expected to be collected?

A)Allowance for doubtful accounts
B)Uncollectible accounts expense
C)The present value of accounts receivable
D)Net realizable value

Question 65

Hancock Medical Supply Company, earned $86,500 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $68,600 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

A)$17,214
B)$17,035
C)$17,900
D)$17,721

Question 66

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2?

A)Option A
B)Option B
C)Option C
D)Option D

Question 67

On December 31, Year 3, Alpha Company had an ending balance of $400,000 in its accounts receivable account and an unadjusted (current)balance in its allowance for doubtful accounts account of $600. Alpha estimates uncollectible accounts expense to be 1% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

A)$3,400
B)$4,000
C)$4,400
D)$4,600

Question 68

Which of the following is not an accurate description of the Allowance for Doubtful Accounts?

A)The account is a contra account.
B)The account is a liability.
C)The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company's receivables.
D)The account is increased by an estimate of uncollectible accounts expense.

Question 69

At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1)Omega earned $200,000 of revenue on account(2)Collected $210,000 cash from accounts receivable(3)Wrote-off $2,000 of accounts receivable as uncollectibleOmega estimates uncollectible accounts to be 4% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

A)$1,920.
B)$2,080.
C)$1,000.
D)$920.

Question 70

Which of the following best describes the percent of receivables method?

A)Income statement approach
B)Direct write-off approach
C)Credit sales approach
D)Balance sheet approach

Question 71

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of Loudoun Company writing off the customer's account?

A)Option A
B)Option B
C)Option C
D)Option D

Question 72

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900, respectively. During Year 2, Allegheny wrote off $1,500 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

A)$2,200
B)$1,500
C)$700
D)$1,600

Question 73

The net effect of the entries to recognize the write-off under the allowance method is to:

A)increase total stockholders' equity only.
B)have no effect on total assets or stockholders' equity.
C)decrease total assets.
D)increase total assets and stockholders' equity.

Question 74

Which of the following is a true statement about a company that uses the allowance method?

A)Uncollectible Accounts Expense is recorded when a receivable is written off.
B)Uncollectible accounts are not recorded until the amount becomes significant.
C)The net realizable value of its accounts receivable is shown on the balance sheet.
D)None of these answer choices are correct.

Question 75

At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1)Omega earned $200,000 of revenue on account(2)Collected $210,000 cash from accounts receivable(3)Wrote-off $2,000 of accounts receivable as uncollectibleOmega estimates uncollectible accounts to be 4% of receivables. Based on this information, the amount of net realizable value of receivables shown on the Year 3 balance sheet is

A)$48,000.
B)$46,080.
C)$49,920.
D)$50,000.

Question 76

Which of the following is a cost of extending credit to customers?

A)Uncollectible accounts expense
B)Lost sales
C)Fees paid to credit card companies
D)Explicit interest

Question 77

At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1)Omega earned $200,000 of revenue on account(2)Collected $210,000 cash from accounts receivable(3)Wrote-off $2,000 of accounts receivable as uncollectibleOmega estimates uncollectible accounts to be 4% of receivables. Based on this information, the December 31, Year 3 unadjusted (current)balance in allowance for doubtful accounts account (balance before expense recognition)is

A)$1,920.
B)$5,000.
C)$1,000.
D)$920.

Question 78

Hancock Medical Supply Company, earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

A)$30,400
B)$30,720
C)$32,000
D)$30,000

Question 79

At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1)Omega earned $200,000 of revenue on account(2)Collected $210,000 cash from accounts receivable(3)Wrote-off $2,000 of accounts receivable as uncollectible Omega estimates uncollectible accounts to be 4% of receivables. Based on this information, the December 31, Year 3 balance in the accounts receivable account is

A)$50,000.
B)$46,000.
C)$48,000.
D)$47,000.

Question 80

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of Loudoun's recording the reestablishment of the receivable on April 4, Year 2?

A)Option A
B)Option B
C)Option C
D)Option D